Barclays Capital, the UK investment bank, will acquire “substantially all of the North American businesses and operating assets” and “certain related assets” of Lehman Brothers, the US investment bank that filed for bankruptcy on Monday.
As part of the agreement, Barclays will acquire Lehman Brothers’ investment banking, fixed income and equities sales, trading and research operations and supporting functions. Around 10,000 Lehman employees will transfer to Barclays.
In addition to $250 million in cash, Barclays will assume certain liabilities and contingent considerations of the acquired business units under the terms of the agreement. Barclays will also buy the headquarters of Lehman Brothers and its two data centres for around $1.45 billion, subject to valuation.
Barclays Capital and Lehman will now start discussions with the relevant international regulatory authorities to acquire similar Lehman operations outside North America. The UK bank will also provide information technology, operational and other support services to ensure Lehman Brothers’ continued operations. As such, Lehman’s US registered broker-dealers “will continue their normal operations”.
John Varley, Barclays Group chief executive, said, “The proposed acquisition of Lehman Brothers’ North American investment banking and capital market operations accelerates the execution of our strategy of diversification by geography and business in pursuit of profitable growth on behalf of our shareholders, in particular increasing the percentage of Barclays earnings sourced in North America. This transaction delivers the strategic benefits of a combination with Lehman Brothers’ core franchise, whilst meeting Barclays strict financial criteria, and strengthening our capital ratios.”
Barclays President Bob Diamond said, “This is a once in a lifetime opportunity. We will now have the best team and most productive culture across the world’s major financial markets, backed by the resources of an integrated universal bank. We welcome the opportunity to add Lehman’s people and capabilities to the Barclays team.”
The transactions have been approved by both banks’ boards, but no shareholder approvals are required. However, the transaction is subject to bankruptcy court approval.